Question: Projects A and B are mutually exclusive. The required return is 10%. Year Cash Flow (A) Cash Flow (B) 0 -20,000 -175,000 1 10,000 80,000

Projects A and B are mutually exclusive. The required return is 10%. Year Cash Flow (A) Cash Flow (B) 0 -20,000 -175,000 1 10,000 80,000 2 11,000 35,000 3 11,000 125,000 If you apply the PI criterion, which investment will you choose? Why? A) Both projects A and B, because Pl is greater than 1. B) Project B, because Pl is greater than 1 and higher. C) Project A, because Pl is greater than 1 and higher. D) Project A, because Pl is positive and higher. E) Both projects A and B, because Pl is greater than 0

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